The race is on to enable airline passengers to make and receive cell phone calls in flight.

Qualcomm Inc. chief executive Irwin Jacobs right, makes a call from an American Airlines jet as Monte Ford, left, listens in. By Donna McWilliam, AP

Cell phone company Qualcomm (QCOM) has teamed with American Airlines (AMR) to develop satellite-based air-to-ground cellular service. Several smaller companies are working on rival systems. In-flight cell service could be introduced within two years and become commonplace within four, developers believe.

Last week, American and Qualcomm officials circled over West Texas in a jetliner making calls from their cell phones. The Federal Aviation Administration and the Federal Communications Commission authorized the flight to test the technology's safety and transmission quality.

"It worked great," says Monte Ford, American's chief information officer, and the special flight's host. "I called the office. I called my wife. I called a friend in Paris. They all heard me great, and I could hear them loud and clear."

The Qualcomm-American partnership covers development and testing. If the technology and business models work, Qualcomm could sell it to other airlines as well. And American, the world's largest airline, could decide to use another system on its planes.

Even competitors liked the test flight. Bill Peltola, vice president of marketing at rival AirCell in Louisville, Colo., says the flight "demonstrated the safe use of cell phones in flight ... and that's good for our industry."

There are still hurdles. Technical bugs need to be worked out. The FCC must be convinced that the new technology won't disrupt cell systems on the ground. And the FAA, airline safety watchdogs and pilots' groups must be convinced the calls won't interfere with aircraft systems and instruments.

Just as important, airline managers and their technology partners must come up with a business model that produces revenue for both.

Strong demand

But there's little doubt that demand for in-flight cell service is strong. Airlines began offering in-flight phone service to passengers in the late 1980s. Despite high prices — $3 to connect and $7 a minute to use the AT&T (T) service on American — the service was a hit early on. But as cell phones became smaller and almost ubiquitous and cell rates dropped, use of the airlines' in-flight phones "fell off the table," says Dan Garton, American's executive vice president.

"Our friends at the telephone companies will tell you it was mainly a service quality issue," he says. "But I've got to think that $10-a-minute rates had more to do with it."

Developers of the new technology say travelers will use their cell phones in flight if the price is right. And that right price is probably less than $1 a minute, they say. Customers could pay by entering their credit card numbers when they place a call, or they could see the charges added to their monthly cell phone bills.

Those who plan on making lots of air-to-ground calls might not even pay by the minute. AirCell is talking with cell service companies about selling them huge blocks of air-to-ground talk time. The cell companies could resell the time to their customers as part of a bundle of premium services.

Sky Way Aircraft of Clearwater, Fla., is developing technology for delivering broadband communications and entertainment services to airline passengers via cell phones, laptops or handheld devices. It says research suggests that revenue from air-to-ground and ground-to-air communications could top $8 billion by 2007.

Competing technologies

Qualcomm's satellite-based system uses a notebook computer-sized device called a "Pico cell" inside the airplane to act like a small cellular tower, managing separate signals. The signals then will be beamed to a satellite for distribution to ground networks.

The Sky Way and AirCell systems work much the same way, only the signals are beamed from the plane to ground towers instead of satellites.

Qualcomm says its satellite system will be more reliable and provide better transmission quality. The ground tower system developers say their services will be cheaper, with more call capacity.

Signal delay is also an issue with satellite-based systems. On last week's test flight, callers reported about a 1-second delay — what TV news watchers witness when an anchorman in New York talks via satellite with a reporter in Afghanistan.

Also, the tested system topped out at 14 simultaneous calls.

"The technology is growing rapidly," American's Ford says. "Just a few months ago the limit was four calls at once. By the time this comes to market, the capacity will be where it needs to be."

A moneymaker?

Ultimately, Garton says, the success of in-flight cell phones will depend on whether airlines and their telecommunications partners each can come up with a way to make money from the venture.

Garton says the airlines should get a small piece of the service fee, just as they get a payment when customers use the Wi-Fi service in their airport clubs. Says Garton: "The industry has to come up with a business model that will work for us, and be priced right for the passengers. I haven't seen that yet."

How do you talk on a jet politely?

Cell phone service at 30,000 feet promises to be a mixed blessing.

American Airlines executive Dan Garton acknowledges that once the technology and financial issues are settled, the airlines must address what he calls "social interactivity issues."

Prominent among those will be how to make calls on a plane without ticking off everyone within earshot.

"It's not a trivial issue," says Bill Peltola, vice president at AirCell, a Colorado company developing one of several air-to-ground cell systems.

In Europe, where Peltola worked for years, railroads have segregated train cars for passengers who want to talk on their phones. Amtrak does the same in the USA.

"Maybe (we'll) go to something like that," says Peltola. He adds jokingly: "Or maybe (we'll) have little plastic cones drop down from the ceiling when you talk on the phone."

David Huy, head of marketing at air cell phone technology developer Sky Way Aircraft, thinks about the annoyance factor, too.

Says Huy: "Maybe we turn the systems off after 8 p.m., or something. Or maybe people will just learn to be courteous, the way they pretty much have learned to step out when they have to make a call or receive a call in a restaurant."

Even if some passengers resent cell phones invading airplane cabins, the airlines won't hesitate to offer the systems once they are approved for use by the government, Peltola says.

"The airlines know that so many of their customers want this that the benefits will outweigh the costs," he says.

By Dan Reed